Australians
trying to crack
mac nut market

Local candy makers say
they were approached about
making purchases

By Jerry Tune
Star-Bulletin

Hawaii macadamia nut farmers are gearing up for a fight from Australia growers who recently came to the islands trying to undercut local nut prices to candy makers.

"We want to launch a '100 percent Hawaii grown' campaign here," said Dave Rietow, president of the Hawaii Macadamia Nut Association.

"We're working on that concept right now."

About two weeks ago, an Australian macadamia nut company sent its chief executive officer to Hawaii, according to Rietow.

"He checked into a hotel and started selling kernal," Rietow said.

The company official tried to sell nuts from Australia and South Africa to local candy makers, Rietow said.

"I don't know if he sold any," he added.

The Australians last year became the world's leading producer of macadamia nuts and had an oversupply of macadamia nuts, driving prices down.

Neal Arakaki, president of Hawaiian Candies & Nuts Ltd., said the company buys only local macadamia nuts but some other candy makers do buy from Australia.

Richard Ohta, secretary for Hawaii Candy Inc., said he was approached but didn't even ask the price.

"I would not want to buy them," Ohta said. The company only uses a small amount of macadamia nuts and deals with a local supplier, he said.

James Andrasick, chief executive of Mauna Loa Macadamia Nut Corp., said he is concerned about the Australian competition, adding that "if the predatory pricing continues" it could result in legal action.

Mauna Loa has lost some business to the Australians, Andrasick said, but he questioned whether they can provide the proper service to clients.

The pressure to lower macadamia nut prices started last fall with bumper crops in Australia and Hawaii.

Rietow said that the Australians are not as organized as Hawaii growers and are more vulnerable to price drops.

In 1990-91, prices also dropped and there were accusations of Australians "dumping" macadamia nuts at below production costs.

When Hawaii growers hired a Washington D.C. attorney, the Australians backed off and the lawsuit was dropped, Rietow said.

Hawaii's macadamia nut industry, the largest in the United States, employs 4,000 workers, 700 growers and 12 processing plants, he said.

The current price drops come after a fact-finding study by the U.S. International Trade Commission, which released its report this week.

"There were no surprises and no conclusions," Rietow said. "But the report was necessary if we choose to file an anti-dumping suit."

The statistics showed that Australia last year displaced the United States as the world's leading producer of macadamia nuts.

The commission also looked into competitive factors -- including macadamia nut trade practices and barriers -- from Australia, Kenya, South Africa, Malawi, Guatemala, Costa Rica and Brazil.

The report for the Senate committee on finance looked at pricing but only for fact finding purposes. Highlights of the report include:

The United States was the world's largest consumer of macadamia nuts during 1992-97, and accounted for 51 percent of the world macadamia nut consumption in 1996-97. Japan was second with 15 percent and Australia was third at 13 percent.

U.S macadamia nut production reached a record high of 26,309 metric tons in crop year 1997-98, up 21 percent from crop-year 1992-93. Next year's crop is expected to be lower due to drought in Hawaii.

Australia's crop reached a peak of 27,500 metric tons in 1997-98, up 129 percent from the previous year. Australia's crop next year is expected to be down because of weather-related problems.

Lands in the United States planted with macadamia nuts have remained about at 1992-93 levels but macadamia farm lands in Australia, Guatemala, Kenya, and South Africa have increased 50 percent since 1992.

Macadamia nut farm prices in Hawaii dropped 5 percent, from $1.72 a kilogram in 1996 to $1.65 a kilogram in 1997. (Total Hawaii farm value was $43.5 million in 1997, a drop of 1 percent from 1996, according to the Hawaii Agricultural Statistics Service).

The relative costs of growing macadamia nuts are generally higher in the United States than Australia. In the United States the break-even price ranged from $1.21 to $2.03 per kilogram, compared with $0.58 to $1.28 per kilogram in Australia.

Since price declines in the early 1990s, the United States and Australia industries have used different marketing approaches.

Australia has used a generic approach to boost demand in markets such as Asia, Europe and North America. The United States has focused on promoting products under brand names or as "Hawaiian" products.